A1 Bulgaria - „You Lead“

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In 2017, the competitive environment in Bulgaria remained challenging. This was particularly apparent in the business segment, which did improve but continued to perform negatively year-on-year. To counter price pressure, Mobiltel maintained its focus on value-based management and the associated enhanced efforts to retain high-value customers. The fixed-line network performed positively on account of the content strategy as well as increased demand for customised corporate solutions. In Q1 2017, Mobiltel introduced exclusive sports content into its fixed-line product for new and existing customers, which has been charged for from Q2 2017. This supported the increase in revenues from fixed-line services.

The total number of mobile subscribers declined in the year under review by 3.2 % year-on-year, which was primarily attributable to losses in the prepaid segment. The latter were largely a result of the national regulation on limiting the number of prepaid card activations per person, which came into force on 1 July 2017. Smartphone and mobile broadband services expanded in comparison with the previous year as a result of the rising demand for mobile data access. The mobile market share increased from 38.4 % to 38.7 %. The aforementioned focus on value-oriented retention resulted in an increased share of contract customers of 88.0 % (2016: 85.4 %). Total fixed-line revenue-generating units (RGUs) decreased by 1.4 % year-on-year, as the growth in the TV and fixed-line broadband services only partly compensated for the loss in fixed-line voice services.

In the Bulgaria segment, total revenues rose by 4.7 % in 2017 compared with the same period last year. This was driven by the increase in revenues from the sale of handsets and higher revenues from fixed-line services as well as a positive one-off effect in other operating income in Q3 2017 amounting to EUR 5.8 mn as a result of a legal settlement. Excluding this one-off effect, total revenues increased by 3.2 % year-onyear. Wireless service revenues were impacted by pricing pressure in the business segment and regulatory effects from the reduction of interconnection and roaming charges. Fixed-line revenues increased, supported by the launch of the exclusive sports TV package and increased demand for fixed-line corporate solutions as well as the growth in satellite TV subscribers.

The average monthly revenue per user (ARPU) remained stable in comparison with the previous year at EUR 5.5. The average monthly revenue per fixed line (ARPL) increased from EUR 10.8 in 2016 to EUR 11.4 in the year under review supported by the upselling of existing subscribers as well as the billing of exclusive sports content.

The increase in total costs and expenses of 5.1 % in comparison with the previous year was driven primarily by higher equipment costs following increased costs for smartphones. In addition, employee costs increased due to sales initiatives while bad debt expenses rose year-on-year due to lower collections. These cost increases were partially offset by lower network maintenance costs and decreased interconnection costs.

In the Bulgarian segment, increasing total revenues more than offset higher costs and expenses, resulting in an EBITDA increase of 3.6 % in the 2017 year under review. Excluding the above-mentioned positive one-off effect, EBITDA declined by 1.0 % year-on-year. Depreciation and amortisation increased by 95.8 % to EUR 215.7 mn in comparison with the previous year due to the brand value amortisation in the amount of EUR 99.7 mn in conjunction with Group-wide rebranding. This resulted in negative operating income in 2017 in the amount of EUR –85.6 mn (2016: EUR +15.4 mn). Excluding the effects of the brand value amortisation, the operating income decreased by 8.4 % year-on-year.